The persistence of inflation in OECD countries: A fractionally integrated approach

Welcome to the UPF Digital Repository

International Journal of Central Banking, nº 4, 2006
http://hdl.handle.net/10230/598
To cite or link this document: http://hdl.handle.net/10230/598
dc.contributor.author Mayoral, Laura
dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
dc.date.issued 2005-02-01
dc.identifier.citation International Journal of Central Banking, nº 4, 2006
dc.identifier.uri http://hdl.handle.net/10230/598
dc.description.abstract The statistical properties of inflation and, in particular, its degree of persistence and stability over time is a subject of intense debate and no consensus has been achieved yet. The goal of this paper is to analyze this controversy using a general approach, with the aim of providing a plausible explanation for the existing contradictory results. We consider the inflation rates of 21 OECD countries which are modelled as fractionally integrated (FI) processes. First, we show analytically that FI can appear in inflation rates after aggregating individual prices from firms that face different costs of adjusting their prices. Then, we provide robust empirical evidence supporting the FI hypothesis using both classical and Bayesian techniques. Next, we estimate impulse response functions and other scalar measures of persistence, achieving an accurate picture of this property and its variation across countries. It is shown that the application of some popular tools for measuring persistence, such as the sum of the AR coefficients, could lead to erroneous conclusions if fractional integration is present. Finally, we explore the existence of changes in inflation inertia using a novel approach. We conclude that the persistence of inflation is very high (although non-permanent) in most post-industrial countries and that it has remained basically unchanged over the last four decades.
dc.language.iso eng
dc.relation.ispartofseries Economics and Business Working Papers Series; 958
dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.title The persistence of inflation in OECD countries: A fractionally integrated approach
dc.type info:eu-repo/semantics/workingPaper
dc.date.modified 2014-06-03T07:14:17Z
dc.subject.keyword Operations Management
dc.subject.keyword inflation persistence
dc.subject.keyword persistence stability
dc.subject.keyword arfima models
dc.subject.keyword long memory
dc.subject.keyword structural breaks
dc.subject.keyword bayesian estimations
dc.rights.accessRights info:eu-repo/semantics/openAccess


See full text
This document is licensed under a Creative Commons license:

Search


Advanced Search

Browse

My Account

Statistics